The 2008 crash forced her to move back in with her parents. After about two years of investing during the worst time of real estate in recent history, Julie and her husband were doing very well, and moved out of her parents. Now all of their portfolio is in Canada, while they live in Los Angeles. They are able to live the life they want, while their investments pay for their lifestyle. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

Julie Broad: -Founder of Book Launchers and full time real estate investor -Began investing since 2001, she’s owned property in 6 different cities & raised >$4 million for deals -Recipient of the Top 20 under 40 award business achievements and community contributions -Author of #1 Amazon Bestseller: “More Than Cashflow; The Real Risks & Rewards of Profitable Real Estate Investing” -Based in Los Angeles, California -Say hi to her at www.HaveMoreInfluence.com/ -Best Ever Book: Pitch Anything by Oren Klaff

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Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Julie Broad. How are you doing, Julie?

Julie Broad: I’m great, thanks so much for having me.

Joe Fairless: My pleasure, nice to have you on the show. A little bit about Julie – she is the founder of Book Launchers and a full-time real estate investor. She began investing in 2001, she’s owned property in 6 different cities and raise over 4 million dollars for deals. She is the author of “More Than Cashflow: The Real Risks & Rewards of Profitable Real Estate Investing”, and she’s based in Los Angeles, California. With that being said, Julie, do you wanna give the Best Ever listeners a little bit more about your background and what you’re focused on now?

Julie Broad: Yeah, you bet. First of all, I’m Canadian. I actually just moved to Los Angeles. I partly feel like Los Angeles is home, but… [laughs] That is where I go home at the end of the day.

In 2001 is when I got started in real estate, and basically for me it’s just been a year since I started working, and I started to think “This is gonna be a long life of working for somebody else”, so I created this plan that I called “Freedom 35”, and all it was was I just didn’t wanna work for somebody else by the time I was 35. But I looked around, I created the plan but I actually had no idea how I was gonna get there. [laughs]

I looked around and I realized I had actually paid for a year of university stock trading, but that felt really lucky; I just felt like I lucked out on a gold stock, and didn’t think I could repeat it… And real estate seemed like the only thing that I could kind of do on the side that would help me get to my Freedom 35 plan. So I purchased two deals that year with the money I’d been saving — I went back to school shortly after that to do my MBA, and I took the money I’d saved to do my MBA and I put it into my first two properties; I partnered with my boyfriend at the time, and that’s kind of where we went from there. We liked it.

We thought “Oh, this is kind of fun”, and in the next year and a half after that we did five more deals; we were getting more creative, because we had no cash and the banks wouldn’t finance the students… So that’s kind of where we started. That was quite a while ago now.

Joe Fairless: You had the Freedom 35 plan – how old were you when you started/created that plan?

Julie Broad: I think I was 24, in 2001. I had to do some fast math, but yeah, 24. [laughs]

Joe Fairless: Okay, you were 24 years old when you created the plan, and… Let’s see… So 24, 15… So you’re about 37, is that correct?

Julie Broad: I’m 40 now.

Joe Fairless: 40, okay. My math is terrible.

Julie Broad: No, it’s okay; I’m totally with you. That’s why I was like “I don’t know how old I was.” [laughter]

Joe Fairless: Okay.

Julie Broad: I quit my job when I was 31, so my Freedom 35 – I was ahead of the game on that one.

Joe Fairless: You knew where I was headed with this, right? I wasn’t necessarily asking your age, I was just asking more about the plan. Okay, so you quit your job when you were 31 years old. Did your income from the investments replace or exceed the full-time job salary?

Julie Broad: It would have been nice if that’s how it worked, but no. I basically got impatient. I got to the point where I was not happy at my job, and the thought of leaving my job to go find another job just didn’t work for me. I just knew I had to leave and dive into real estate full-time and make the most of it at that point.

My timing was terrible though, because this was 2008. So seven years after I started, in 2008, I decided to do full-time in real estate, but no, my income was not replacing it, and all of the Best Ever listeners, I’m sure you know 2008 was a terrible year for real estate; all the values went down, it was tough to get tenants, all that kind of stuff.

In Canada we had it a little better than in the U.S., but it still was a tough time. Nonetheless, it was a great learning experience to do it at the toughest time, because once you’ve gone through the toughest time, you know you can handle everything.

Joe Fairless: Did you make money in 2008-2009 when you went full-time?

Julie Broad: I moved in with my parents. I got married and did what every newlywed wants to do, and that is move back home with their parents. [laughter] Because we were making money, but we weren’t making much. We certainly were not making enough to replace my salary at the time, so we moved in with my parents, and the little money that we were making, we poured into real estate.

About a year later I got my husband at the time — people think, “Oh, you quit your job, but your husband had a job.” My husband was a commercial mortgage broker at the time…

Joe Fairless: Oh, wow… Double whammy.

Julie Broad: Yes. He was making absolutely nothing, but he did stick it out in that job for another year and then I dragged him out. I said “Look, you’re not making money… Let’s do this full-time, let’s go for it.” So yeah, we dove then head first at the time, and within two and a half years we were out of my parents’ house and living on our own and doing quite well.

Joe Fairless: Within those two and a half years, from 2008, living with your parents, to 2010-2011ish, how did you specifically make money during the tough times of real estate, that allowed you to then move out of your parents’ house and get your own place and be on your own two feet?

Julie Broad: You bet. The two main things we did were rent to own, as well as we raised all our money. We were working with investors who wanted to get into real estate; the advantage at that time was a lot of people did see that real estate was gonna come back, people will always need a place to live… So people realized that “Yeah, it’s down now. This is probably the cheapest we’re ever gonna buy it. Let’s get in and ride the wave back up.” We were doing primarily buy and hold, but we added rent to own to our strategy to get that cashflow up. Because with the rent to own, a place that might rent for $1,400, we were able to get $1,800-$1,900 rent, and part of that was the credit going back to the purchase of the property in the future.

So we raised all our money to do the deals from investors, and we added the rent-to-own strategy. We would do basically a house every month. We were also doing a lot of rentals to add suites, so that we were getting additional income from the basement suite if we weren’t doing a rent-to-own on it.

Joe Fairless: Will you repeat the last part about the suites? So you were doing a house a month and you were also doing renovations… And what did you say about the suite?

Julie Broad: We would add a suite. So in Canada it’s basement suites; in other places they might just add a second unit to the property, but we were adding another unit so that we can generate additional income from other properties. So if we found a great single-family home with a good layout, we could add a suite, and that would generate cashflow. Because the whole thing [unintelligible [00:08:38].24] cashflow. We had to get the money coming in the door, so we had the income to live on.

Joe Fairless: Was there any type of house that you would look for where you could add a suite? Because if you casually just mention it, “Well, we just added on another room and we got more income”, I’m like “D’oh! I should always do that.” I buy a four-bedroom house, I’m gonna make it a five-bedroom house. A five-bedroom house – I’ll make it a six.” But I imagine there’s zoning and other types of characteristics of a property that you look for prior to implementing that strategy.

Julie Broad: Good question. So basically we narrowed in on a couple of neighborhoods where in the ’70s builders had built this one format of house. It had three bedrooms up and a bathroom upstairs; sometimes a bath and a half, like a little [unintelligible [00:09:25].12] Then downstairs was usually either open basement with another bathroom (or the plumbing for a bathroom), or sometimes they had a bedroom and a bathroom and some other space… But it was the same format house in these couple neighborhoods. It was the exact same house, so we were just hitting repeat on that renovation.

Basically, it was a three-bedroom house up, with space downstairs and sometimes that fourth bedroom. But the big thing for us with that area focus was getting to know our neighborhood, getting to know exactly the layout of the house, so we could walk in and within 60 seconds it’s like “Yeah, this house is gonna work.”

And we also knew the problems. They all kind of had a couple design flaws, so we knew “Okay, we’re gonna have to fix this thing [unintelligible [00:10:03].15] We know that this is gonna be how we’re gonna put the bathroom or the kitchen downstairs…” We made everything repeatable and it also allowed us to keep our costs down by narrowing in on a couple of neighborhoods with the exact same layout of house.

Joe Fairless: That’s beautiful. So you identified a neighborhood that was built by the same builder or builders who build very similarly, therefore you knew what to look for, what the opportunities were and what the design flaws were, so you’d go in and remedy those and it was basically a repeatable process.

Julie Broad: Yeah, and you don’t have to run your numbers every time, you don’t have to run your research rents… Then it’s really easy in the future too when you’re checking on your property, because all our properties are really in a small distance. You could walk that neighborhood and check on a good percentage of our properties. They’re all within walking distance of each other, because we did zero in on that neighborhood.

Joe Fairless: Yeah, that’s another good point. Okay, let’s talk about how you funded all these deals. You said you focused on two main things – rent to own and raising all of the money that you need to purchase the real estate. Can you from a high-level – and very briefly, because I wanna spend more time on “raise all the money”… But on the rent-to-own business model, can you mention the overall business model and also specifically the ways that you make money within that business model?

Julie Broad: Yeah, rent-to-own is basically giving the tenants the right, not the obligation to purchase the property from you in the future. In exchange, they usually give you some sort of deposit upfront, because you’re locking in a price for them in the future. So if the property goes up tremendously in value, you don’t get that profit; the tenant actually gets the profit. They buy it from you, so you get a deposit upfront for that right. And then every month, typically, a portion of the rent goes towards their down payment in the future to help them buy it.

Now, people that we were typically working with were either new to the country so they didn’t have credit established, or people who had gone bankrupt in the past, but were re-establishing their credit; they had good jobs, they just didn’t have the credit to buy their house. So that’s where it was, and for us it was the cashflow, because you get the deposit, but you also get that cashflow every month, the extra rent credit.

Joe Fairless: And how long typically do you have the rent-to-own contract before they exercise their option to purchase?

Julie Broad: We typically did two years, sometimes three. It’s really hard to know what the real estate market is gonna do in the future, and you wanna set the price so that it’s fair, so that they’ll be able to buy it, but you also don’t want to leave $100,000 on the table because the market shoots up. So we didn’t wanna do them too far into the future.

Joe Fairless: Okay. Now let’s talk about how you were able to raise money for these deals. One, how did you structure it with investors? Let’s start there.

Julie Broad: Apparently, we did a joint venture. Basically, our partner would put in all the money that we needed – or the majority of the funds that we needed – and they would qualify for bank financing. Because there in Canada – not here in the U.S. where I am right now, but in Canada – we still were able to get bank financing for some properties; if somebody had great credit and a good job, they could still qualify for financing. We couldn’t, because banks don’t like real estate investors really, so by working with people with great income, they could qualify for the best rates, and then they would put up all the money and we would do all the work. Like I said, we had our systems dialed in. We knew our properties, we’d oversee the properties going forward, and exchange, split the profit, and of course, if anything goes wrong in the future, we split that, too. If they need a roof, or if something explodes, we’re both on the hook for that, 50/50, so that’s why we called it a joint venture.

Joe Fairless: At the beginning, your very first deal where you brought in a joint venture partner and he or she funded the majority (or all) of it, was it 50/50?

Julie Broad: No, the very first deal was way back in 2003, and we just partnered with a friend basically, because we didn’t know what we were doing back then. I think we actually put in 30% of the funds and he put in 70%.

Joe Fairless: Did you split it 50/50 or did you split it 70/30?

Julie Broad: No, we split it all 50/50 going forward, because he recognized that we were doing all the work. But the challenge with that was we actually did five deals with him over the years, but he never would go to the model where he put in all the funds. So if you do that to start, just know that that person is gonna feel like — even though we made him probably the most money that we made anybody over all these years, he still felt like we had to put money in, because that’s how he’d always done it. So just know that people will have that expectation if you start there.

We stopped doing deals with him because we weren’t gonna put money in after a while.

Joe Fairless: Yeah… That’s a fairly reasonable expectation from an investor’s standpoint, because they wanna see alignment of interest and they wanna see you have your own money at risk in the deal. How did you bring in other joint venture partners without putting your own money in the deal? Because I know that question came up multiple times.

Julie Broad: You know, it’s funny, because once you own your value, people don’t question it anymore; for years, people would say “Well, you don’t have any skin in the game, why should I invest with you?” Then one day – I think we’d just gone through a hurricane of dealing with a bunch of problems, and our partners were on the beach, kicking back, they didn’t have to worry about anything, and we’re still sending them the checks, giving them their 12%-15% of return every year, and we realized “You know what? We’re giving them massive value. They’re not getting returns like this anywhere else”, and we just stopped hearing it.

I know that sounds kind of woo-wooey, but when you walk into a room and you meet with somebody and you tell them “This is how it is, this is why we do it this way” and you’re willing to walk out the door if they don’t think that’s fair, then people don’t question it anymore. Or it they really aren’t a good fit to work with you, then they leave and they go find somebody who will put money in. But if you own your value, it comes across and you won’t hear it as much.

Joe Fairless: Rent-to-owns – the way that’s structured is that it’s anticipated you’re not gonna have the property in 2-3 years, that the tenant/buyer is going to exercise their option to purchase in 2-3 years, so basically you’re making money along the way and you do not have the deal in 3 years. So what have you done since then – if anything – to build your own portfolio, since those are basically three-year flips but making money in multiple ways, versus a fix and flipper who makes it usually in one way.

Julie Broad: A couple things. One is the only good rent-to-own is for a couple of years, just for the cashflow. I’m not a big fan of them personally, because when they fail, it’s miserable. If the tenant doesn’t buy from you – and this is totally personal – I feel… Because you keep the deposit, you keep the rent, because that’s how it’s all structured, that’s kind of why rent-to-own exists, but it’s just a bad feeling. And it’s nothing you did wrong; it’s all been straightforward right from the start, but we had a whole bunch fail all at one, because the city assessments came out, and the city assessments were down, and the city assessments aren’t a good reflection of property value. But our tenants all saw their city assessments and said “Hey, I’m supposed to buy this in a year. It’s not worth what you’re telling me it’s worth”, and they didn’t even have conversations with us. There were three (bang-bang-bang) that quit without even talking to us to say “I’m out.” It was a terrible feeling, I’m not a fan.

But back to the question – basically, we only did it for a couple of years just to generate cashflow. We were always focused on buy and hold, because we were in this to create the freedom, and we didn’t want to have to always be turning deals. We don’t actually do active deals anymore, we’re just overseeing our portfolio now.

Joe Fairless: Where is your portfolio?

Julie Broad: In Canada, and it’s all now in British Columbia.

Joe Fairless: Wow, all in Canada. I imagine you have a third-party management, since you’re now in Los Angeles?

Julie Broad: Yeah, we have a couple, because we did get into commercial deals in the last little while, so we’ve got a commercial property manager and a residential property manager.

Joe Fairless: Let’s talk about the commercial deal – what are the numbers and what it is exactly.

Julie Broad: We have a dental office [unintelligible [00:18:00].27] the most recent one – and I would categorize it in the best deal that we’ve done – with a medical office building that we bought a couple years ago for a little over three million dollars. It’s just such a self-sufficient — long-term leases, with a commercial property manager in place… It’s triple net leases, so that means the tenants are paying the majority of the cost. So when taxes go up, the tenants cover that cost. [unintelligible [00:18:24].19] the tenants cover it.

I’m a big fan because I wanna be hands-off. Now, both my husband and I have other interests. We’ve used real estate to create the life we wanna live; we don’t focus on real estate as our day-to-day thing anymore… So deals like this are just spectacular, because we don’t check on things. My husband’s very active in communicating with the property manager, but it’s really much, much less time-intensive than residential.

Joe Fairless: I’m bouncing around, and forgive me… [laughter] I’m just looking at my notes – I do have a couple follow-up questions on that deal, but when you just mentioned the husband thing, it triggered a question. The boyfriend you partnered with on your first two deals – is that your husband now, or is that someone else?

Julie Broad: Yes, it is my husband, it worked out. Not always a recommended strategy, but for me it worked out. [laughs]

Joe Fairless: Okay. My follow-up question if it was different people was “How did you resolve the disposition of those properties and the ownership whenever you two broke up?” but we’re not going there because you haven’t broken up, and you won’t break up. Okay.

Julie Broad: We did have a partnership agreement, because at the time we were newly dating, after we’d been together eight months at the time, and you never know where things are gonna go. So we had a partnership agreement. Nothing super formal, but in the event that we did break up, we layed that all out, because this is business, as much as we were together; it was still a business transaction.

Joe Fairless: Alright, now let’s go back to the medical office – three million dollar purchase price. Do you two have partners in that one?

Julie Broad: Yeah, we have a few, because it required significant capital to get into that deal. We have three partners on that deal.

Joe Fairless: Three partners… How did you get to know each of the three? I’m asking because other Best Ever listeners who want to put together a three million-dollar deal and they don’t know who to talk to about partnering, they would love to know how you met your three money partners.

Julie Broad: Yeah, you bet. Interestingly, one of them read my first book, More Than Cashflow, and had contacted us saying “I wanna do a deal with you.” So my book was the primary source of one of them. The other one of them was actually my husband’s parents, which generally we say “no family”, as kind of like a hard and fast rule, but again, we treated it like a business relationship; so there’s contracts in place, but his parents are the other one.

Then another one is a long-term investor of ours who’s done quite a few residential deals with us, who we originally met through just spreading the word of what we were doing – letting our friends and family know what we were doing, so that if they ever heard of anybody who wanted to get into real estate, they’d let us know. For quite a few years, that’s all we focused on – building our brand, letting people know we were investors, and really trying to attract the capital. So the other investor was somebody we had worked with for years through that original source.

Joe Fairless: Okay, and you built the track record with that investor, and then proved yourself over time. Did you all put any of your money, the medical office one?

Julie Broad: Yeah, we did put money into this one.

Joe Fairless: And what structure do you have with investors on this one?

Julie Broad: Honestly, I’m not sure how much I should disclose on this particular one, if that’s okay.

Joe Fairless: That’s fine, no biggie. So how long are you planning on holding on to this property?

Julie Broad: Long-term. It’s a really great property, with future development potential. It’s got a big chunk of land in a really great spot in the city of [unintelligible [00:21:40].13] We’ve got lots of different potential plans; nothing firm, but we’re definitely looking at it from a 10-year, if not longer, holding.

Joe Fairless: What is your best real estate investing advice ever?

Julie Broad: I’d have to say focus on creating the life you wanna live. It’s easy to get romantic about the numbers or distracted by deals and really just drive yourself to do more and more, but always come back to “What’s that ideal day you wanna live?” because for a while we got side-tracked from that, and real estate is a great way to create the life you wanna live.

We’re down in L.A. and my husband is pursuing acting; I’ve got a new business that I just love – helping people write books and publish them and sell them, and real estate got us there. So it’s one of those things where you just always go back to “Is this deal gonna get me closer or further away from the life I wanna live?” Not all deals work for all lifestyles that you wanna live.

Joe Fairless: What can you tell us about the dental office?

Julie Broad: It’s just a single-tenant property. We bought it a couple years ago. I could see it from where we used to live. [laughs] I like to keep an eye on things and it was close… But it was also cool because the lease has step-ups. So every year the value of the property goes up, because commercial is valued on its income; so every year the lease rate goes up, and the same thing is triple net, so it basically takes care of itself.

And the cool thing about things like dental offices is if your tenant ever does leave, they rarely are just gonna close the doors; they’re almost always gonna sell their practice, so you don’t have to worry as much. The drawback of commercial is your property can be vacant for years, but with something like a dental practice, there’s so much value in that practice that they’re more likely to sell it, so you’ll have a new tenant moving in when they leave.

Joe Fairless: Oh, powerful one. I enjoyed that so much I reached out to him afterwards and I interviewed him on the show.

Julie Broad: For somebody raising money it’s a spectacular book to read.

Joe Fairless: Break down every preconceived notion that you have about having conversations with investors when you’re selling something.

Julie Broad: Mm-hm.

Joe Fairless: What’s the best ever time to move into your parent’s house?

Julie Broad: [laughs] Probably not when you’re a newlywed. [laughter] Do it when you’re young. Do it when you’re really young.

Joe Fairless: Not as a 31-year-old newlywed?

Julie Broad: No. [laughter]

Joe Fairless: Best ever deal that you’ve done that you haven’t mentioned already?

Julie Broad: The medical office would be the best. I’m gonna go with the worst one, because it lead to some of the greatest things in my life. We bought a sixplex that became a crackhouse; our property manager got charged with manslaughter and it became known as a crackhouse and we couldn’t sell it, we couldn’t do anything with it… And it was an awful deal, but we learned the most from it, and my book was a number one overall Amazon best-seller in Canada probably largely because of that story, and the lessons that we learned and shared from that story. So there you go… There’s a twist on the best deal.

Joe Fairless: Oh, yeah. And knowing what you know now, after experiencing that deal, what would you do differently if presented the same situation?

Julie Broad: I would never do a deal like that, because I would go back to the life I wanna live and my ideal day, and my ideal day is not feelingless, challenging tenants and a property that’s always falling apart, in a neighborhood where there’s always rough things going on. We did that deal because the numbers were just phenomenal, but you know what? There’s a reason. When the numbers look too good to be true, they usually are. Those numbers were real, but we spent a massive amount of time, energy and even money trying to fix the problems with that problem property.

Joe Fairless: Best ever way you like to give back?

Julie Broad: Sharing what I’ve learned, that’s really the biggest way. I’ve done a ton of videos, a ton of articles. I’m always happy to share the lessons that I’ve learned. But also, I do give to a lot of causes, so if there’s a cause that comes my way that touches my heart, I open up my wallet pretty fast.

Joe Fairless: And how can the Best Ever listeners get in touch with you, Julie?

Julie Broad: The best way is through my website, HaveMoreInfluence.com. You can reach out through the contact form or sign up for the newsletter. You just kind of hit Reply, and it magically comes to my inbox.

Joe Fairless: Well, Julie, thank you for being on the show. Thanks for talking through your career progression, moving into your parents’ basement as newlyweds and the deals that you’ve done in 2008, 2009 and 2010, specifically. That was interesting, because it was a tough time, so how did you make money? You made money by doing the rent-to-owns, and you brought in joint venture partners, you structured it in the 50/50 primarily; there were some exceptions when you got started. And then your intentional approach to a lifestyle, and the types of deals that you do now based on your intentional approach about the lifestyle that you choose to have and create for yourself, versus chasing shiny objects that look like great cash-on-cash returns, but might not align with your intentional lifestyle. That’s a really important focus of our conversation, because you started out talking about the Freedom 35 plan, and we ended talking about the focus on creating a life that you want to live, and we got into some really good specifics in between.

Thanks for being on the show, Julie. I hope you have a best ever day, and we’ll talk to you soon.